More Good News for Aviation in Missouri

Thanks to former intern (and current staff member) extraordinaire Audrey Spalding for finding this piece on aviation in Columbia. It seems that Delta Airlines is having enough success serving the Columbia market that it is foregoing a tax subsidy for which it is eligible. I am fascinated by the airline industry and its status as the quintessential oligopoly. (Please don’t take my link to the Consumer Federation report as an indicator that I am in total agreement; it is just an interesting viewpoint.) I also love the line from Up In The Air where George Clooney discusses the historic significance of Lambert Airport. But I digress. … 

It is exciting that the private commercial airport in Branson is expanding its operations; it is also exciting that at least some airline service in mid-Missouri can be operated at a profit without government support. Here is to hoping for much more of both!

If You Build a Good Business Environment, They Will Come

The Missouri Department of Economic Development has requested $343,697,083 for the 2011 fiscal year, which is equivalent to the combined total of requests from the Departments of Agriculture, Conservation, and Labor and Industrial Relations.

Some line items in the Department of Economic Development’s budget:

Expenditure FY 09 FY 10 Governor recommends ’11
Marketing $3,344,842 $4,414,229 $4,399,229
Sales $1,355,887 $1,535,333 $1,519,337
Finance $977,815 $1,194,556 $1,194,556

The stated purpose of this department is:

The Business and Community Services Division consists of the Missouri Economic Research and Information Center (MERIC), Marketing, Sales, Finance, and Compliance Teams. The division promotes Missouri as a great place to do business and helps create an environment that will stimulate jobs and new private investment. Other services include various programs aimed at investing in Missouri’s communities to allow for future sustainable growth and to increase opportunities for new local and state revenues.

The keys to Missouri’s recovery from the current economic recession are: 1) job creation and new capital investment through the retention and expansion of existing Missouri companies and the recruitment of new job opportunities; 2) the development of a skilled, motivated, and productive workforce; 3) support for the development of innovative and high tech next generation industries; and 4) leveraging state and federal funds for community development.

This department’s function is in line with suggestions floated in a St. Louis Post-Dispatch article series last week, titled “Can St. Louis compete? Time to act is now.” The first two points in the last article of the series were about attracting young, educated people to live in Saint Louis. It focused both on those who come here for school and those who have left to go to school elsewhere. The article suggested a publicity tour of sorts that would herald Saint Louis’ good characteristics to other cities, and might entice people to live here.

Attracting educated young people does not take a publicity campaign. Young people will come to Saint Louis — and stay here — if there are jobs. Jobs will come to Saint Louis if the area provides a good business environment, with low taxes and amenable employment structures. Show-Me Institute scholars have suggested policies that would make create a more business-friendly economic climate, like eliminating the earnings taxes in Saint Louis and Kansas City, or eliminating the income tax statewide. Respectively, eliminating those taxes would entail a 1- or 6-percent raise to employees — income that can then be spent on goods and services. Lowering tax rates in general (rather than targeting lower rates through the use of distortionary tax credits) would help attract businesses and jobs, and subsequently young educated people. (One additional benefit of lower tax rates is that it would not be necessary to fund million-dollar publicity programs.)

The publicity campaign has it backwards, attempting to bring young people to Saint Louis in order to attract more business. Bring the business and jobs to Saint Louis, and young people will want to stay.

News Article About Abuse of Unpaid Internships a Good Reason to Plug Our Paid Internships!

An interesting New York Times article carried in today’s Post-Dispatch discusses the growing issue (those who advocate greater government involvement in the economy would say “problem”) of unpaid internships. Basically, some people are accusing companies of hiring recent graduates for an internship and essentially employing them as unpaid laborers. The point is entirely moot for the Show-Me Institute, though, because, according to the article, nonprofits can have as many unpaid internships as we want. But that is also moot, because we have paid internships! And, given that we are now located in the city, interns even get to pay the earnings tax on on their internship salary!

Seriously, I used to be a Show-Me Institute intern, and this is a fun place to experience. I hope you’ll consider applying if an internship is something you are considering. Former and current interns, please blast away in the comments section! I am looking your way, Phil, Jacob, Calvin, Nick, Dan, Patrick, Steve, Clovis, Charis, Caitlin, Alyssa, Kristen, Audrey, Abhi, Maurice, Kathleen, Matt, and more.

P.S.: “I get the car!”

Exercising the Right to Keep and Bear Arms

According to the Second Amendment:

A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.

Last weekend, I took the basic class required by Missouri law to qualify for a concealed carry endorsement. The experience was really enjoyable and informative, and I encourage others to take the class, even if they do not intend on concealing a weapon. I learned about handgun safety, laws relating to firearms, marksmanship techniques, and many other topics.

The following is a photo of me taking the live fire test with the certified instructor. All I have left to do is visit a series of local government offices, and then I will hopefully have the permit.

IMG00252

Do the Ends Justify the Means?

I am in generally opposed to the use of tax increment financing (TIF), because I don’t believe the government should be in the business of picking economic winners and losers. But I felt it was only fair to point out that the use of TIF does not always result in disaster, as is exemplified by the case of Brentwood Promenade. A recent St. Louis Business Journal article describes the success of the project, for which the city of Brentwood issued a $21.5 million bond backed by TIF financing in 1997. On March 1, the city of Brentwood made its final payment and dissolved the TIF district two years ahead of schedule. The city now stands to collect about $2 million in annual sales taxes from the shopping center’s tenants, which include Target, Trader Joe’s, and Bed Bath & Beyond. This will provide the city with a projected 33-percent increase in sales tax revenue. Property taxes from the 25-acre area have grown from approximately $60,000 a year to about $900,000 a year today. This success of this retail center (success that is obvious to shoppers trying to find a parking space on a weekend) is also credited with increasing additional investment in the city, as exemplified by the increase in the amount of new home construction in the city.

But, as anyone who has lived in the St. Louis area for a long time knows, tax increment financing is not always so successful.  The St. Louis Business Journal article reminds us of the year 1991, when the city of St. Louis backed the bonds for Midland Group’s $53 million St. Louis Marketplace. When the retail center didn’t meet revenue projections, the city was on the hook for $3 million. Also instructive is a January 2009 report by the East-West Gateway Council of Governments, which found that 80 percent of TIF money during the previous 15 years was devoted to retail projects, and that instead of creating growth, the process has simply moved temporary growth around.

Even when TIFs are successful, such as in the case of Brentwood Promenade, there are numerous other concerns with using this financing method. Although TIFs are intended to be used to develop “blighted” areas, they are often utilized in areas where development would have happened anyway, which deprives municipalities of revenues in the short term that are instead being used to pay for the project. Even worse, the designation of “blight” can allow the government to condemn property through the use of eminent domain.

But perhaps the most insidious trait of tax increment financing is that it gives government the power to decide exactly which developments will take place, and where, rather than allowing development to happen as it naturally would under market conditions. The economic advantages afforded to those who receive the TIF open the door for political favoritism, which should have no place in development. Equally important, it is not the government’s responsibility to oversee retail development — which, as the East-West Gateway report shows, characterizes the overwhelming majority of these projects in the St. Louis area. So, even when these retail projects are successful and the city benefits, do the ends justify the means?

The Private Provision of Mass Transportation

This is an extremely interesting (and relatively short) video, made by PBS’s Frontline and NPR’s Planet Money, about the private buses in Haiti called “tap-taps.” The buses shuttle residents of Port au Prince around the city for just a few pennies per trip, which is necessary because most Haitians make less than $2 a day. The buses are extremely competitive and completely unregulated, so the owners of the buses have devised a method of signaling which buses are well-maintained and staffed by good drivers, and which aren’t: elaborate murals painted on the sides of the buses. If an owner is not willing to stringently maintain the outside of the bus, chances are the internal workings and driver leave something to be desired as well.

If post-earthquake Port au Prince can operate a cheap and efficient system of mass transportation, it stands to reason that much richer American cities like Saint Louis can, as well. There are, of course, many differences between the markets for mass transportation in Saint Louis and Port au Prince. Only 3 percent of Haitians own cars, and Port au Prince has more than 73,000 people per square mile compared to fewer than 6,000 per square mile in Saint Louis city, so there is much higher demand for mass transportation in Port au Prince than in Saint Louis. Still, there are clearly numerous people in the area that use some form of mass transportation, so private buses are at least a possibility … or they would be if they weren’t essentially outlawed in order to give Metro a mass transportation monopoly.

We need not eliminate Metro to find out whether a competitive system can replace the current monopoly. If Bi-State simply allowed private bus lines to compete, and the cities and counties in the area loosened the regulations on jitneys and taxis, we could very well see many cheaper and more efficient transportation alternatives emerge. Metro would still have an unfair advantage because of its public subsidy, but we could decrease that subsidy and use the savings to instead institute mass transportation vouchers for people below a certain income level. These people could then use the vouchers to ride the transportation system of their choosing.

It’s possible that the public transportation system would still outperform the private sector, and the devil is always in the details, but economic theory and massive amounts of historical experience show that monopolies are inefficient and charge high prices while competition improves products and lowers prices. We should not expect mass transportation to be any different; the burden of proof should be on those who defend the monopoly system. If private mass transportation can operate in Port au Prince, where per-capita income is less than 1/35 of the level in the United States, it’s at least worth trying here.

Private Airport in Branson Seems to Be Flying Along Smoothly

As you may or may not know, America’s only privately owned and operated commercial airport is located in Branson. It opened right around a year ago, and from what I can tell everything seems to be going well. The Springfield Business Journal has a write-up on the expansion of flight at  Branson airport, and it also made Robert Poole’s recent Reason Foundation newsletter on airport issues.

Kansas City has considered this idea, and it would be wise for St. Louis to consider it as well. The idea that only the government can operate our airports may be deeply imbedded in public opinion, but private operators could certainly undertake airport operations if given the opportunity. Hopefully (and apparently), Branson will show us the way.

Another Instance of Parents as Teachers Participants Serving as Research Subjects

When I blogged about a North Carolina Parents as Teachers program that encouraged participants to join a research study, I hadn’t heard of any Parents as Teachers programs in Missouri asking participants to do something similar. It turns out that Parents as Teachers has enrolled Missourians in research; in this study conducted by professors at Washington University and Saint Louis University, the entire set of subjects comprised only Parents as Teachers participants. The study examined the relationship between parent behaviors and child nutrition.

In accounts of the activities and benefits of Parents as Teachers, supporters describe the program’s role in promulgating information that has previously been gleaned from academic research. If Parents as Teachers is also itself facilitating research with participants as subjects, that fact should be considered in debates over its funding.

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